Blame German Tax Law, Not Liechtenstein Privacy Law

While European politicians are ganging up in an effort to bully Liechtenstein into surrendering its fiscal sovereignty, a couple of reporters for Bloomberg point out that Germany’s tax laws are the real problem. Tax rates are too high and the tax code is senselessly complicated. As a result, almost everyone in the country seeks to evade tax:

When Andreas bought a new hard drive at a Munich computer shop the clerk offered it for 127 euros with a receipt or 80 euros without. He took the lower price. Most Germans make similar deals to avoid high taxes, the film production manager said. …Chancellor Angela Merkel has failed to fulfill a campaign promise to simplify the tax code and reduce tax avoidance. Germans evade about 30 billion euros in taxes every year, estimated Dieter Ondracek, head of the German tax collectors’ union DStG. …”Unfortunately, tax evasion has become a popular sport in Germany,” Ondracek said Feb. 19 in an interview with Bloomberg Television in Berlin. Germany last year increased its top income tax rate to 45 percent, ranking it eighth among the 27 European Union nations. Capital gains taxes of as much as 50 percent are also among the highest in Europe. …People of more modest means can find loopholes in books such as “1,000 Legal Tax Tricks” by Franz Konz, who’s helped Germans cut their tax bills for 20 years. His book, published last year by Droener/Knaur, is the bestselling tax volume on Amazon.com’s German language site. Part of the issue is that German tax laws have become increasingly complicated as politicians added more and more exemptions. Since German reunification in 1990, the number of tax advisers in the country has jumped 60 percent to 72,669, according to the latest statistics from the BStBK tax advisers’ federation. …”People feel they don’t know all the loopholes so they’re constantly uneasy about paying too much tax, which prompts them to do things that are sometimes illegal,” [Andracek] said. “A tax burden that’s generally seen as too high and wasteful government spending” contribute to discontent. Andreas agrees. “It’s not about greed, it’s about getting by,” he said. “It’s not a crime if everybody does it.”

This story deserves a personal anecdote. On my first trip to Germany, for a tax reform conference in the mid-1990s, a couple of us decided to take a 30-minute cab ride from our conference center to downtown Cologne. We hailed a cab and the first thing the driver did was ask whether we needed a receipt. Not aware of Germany’s national pastime of tax evasion, we must have looked confused, so the driver helpfully explained that we could save 30 percent if he got his fare “off the books.” What did we decide? Well, I’ll leave that to your imagination.